Turkey, Azerbaijan and Georgia on Thursday signed four agreements for the1,730-km (1,081-mile), $2.4 billion pipeline from the Azeri capital Baku toTurkey's Ceyhan Port that will by-pass the region's two energy giants -Russia and Iran.

Oil analysts said the agreements would provide a legal framework for thepipeline, designed to carry one million barrels per day (bpd), or 50 milliontonnes a year. "The signing of the four agreements, which will provide thelegal basis for Baku-Ceyhan, is a necessary but not sufficient condition,"Necdet Pamir, an oil analyst from the Ankara-based Eurasian StrategicResearch Centre said.

"There is no throughput guarantee for the pipeline and it just does not havea finance model that will persuade Western financiers to provide therequired loans," said Pamir, a former negotiator for Turkey on the pipelineproject.A Turkey-based official of BP Amoco Plc, which leads the AzerbaijanInternational Operating Consortium (AIOC) producing oil in Caspian, said ajoint company should be formed to first lure new shippers for Baku-Ceyhanand then market the Caspian oil.

"This could be the next step now that the documents are signed," he said.The accords were only "a start-up", according to a Baku-based oil source, inIstanbul for the Organisation for Security and Cooperation in Europe (OSCE)summit where the Caspian energy deals were signed.

Pamir said the AIOC, which produces 1,15,000 BPD at present, would produce7,00,000-8,00,000 BPD at peak production in 2007. "But this will still befar short of the line's commercial viability level of one million bpd," hesaid. AIOC is the only venture producing oil among the 17 consortia in theCaspian, almost all led by Western oil giants. The consortia's initial oildrills have given disappointing finds.

Strategic importance
Turkey will get an average $100 million annually in transit fees fromBaku-Ceyhan, but its strategic importance was more important than financialgains, analysts said.

"The line will by-pass Russia. Central Asian republics will no longer dependon Russia to export oil and gas," said Pamir.

BP Amoco, a long-time opponent of the Baku-Ceyhan project on cost grounds,announced support last month in an apparent turnaround of policy.

"These pipelines will be an insurance policy for the entire world, helpingto ensure that our energy resources pass through multiple routes, not asingle choke point," said the US President Bill Clinton, who helped steerthe agreements to completion and signed them as a witness. Kazakhstan andTurkmenistan signed the accords as witnesses.

The project was shepherded by the United States, which wants to breakRussia's dominance over transport routes from the region and allow Caspiannations to market their own energy resources.

Russia, which had reportedly tried as recently as last weekend to scuttlethe oil pipeline deal, dismissed the $2.4 billion oil pipeline project astoo expensive.

Leaders at the ceremony acknowledged that the viability of the oil projectremained to be proved and financing had yet to be arranged. But theyexpressed optimism that both pipelines would be built.

"Today represents just the beginning of the intensive commercial phase ofthis project," Clinton said. Clinton pledged the US help in financing theBaku-Ceyhan oil and Trans-Caspian gas pipelines through the US Governmentagencies. The Baku-Ceyhan plan calls for the pipeline's construction tobegin in early 2001 for completion in 2004. Also regarded as anenvironmentally friendly alternative to shipping oil through Turkey's narrowstraits, the project is designed to pump out 25 million tonnes of Azeri and20 million tonnes of Kazakh oil annually.

Turkey, Azerbaijan, Georgia and the AIOC will now form an implementationcommittee to draw up detailed engineering documents and a finance planthrough "open season" negotiations in early 2000, a White House pressrelease said.

Turkey agreed to guarantee the $1.4 billion cost of the part of the projectto be built in Turkey, the US Officials said.